Business Solution Can Ease Problem of the Under-banked

Providing financial services to the poor and credit-challenged is big money in America, generating $89 billion a year in fees and interest. But companies that once eschewed these customers are seeing the chance to profit, while potentially improving people’s lives.

Houston happens to be one of the three most “under-banked” cities in America, and Texas ranks fifth for the number of people who don’t have bank accounts, according to the Federal Deposit Insurance Corp. American Express has sponsored a YouTube documentary called “Spent,” featuring two Houston-area residents, to educate people about the problem.

The 40-minute film shows how quickly someone can go from solidly middle class to using expensive check-cashing services and taking out exploitative title loans. The fact that health problems precipitated the financial crisis of two of the film’s subjects is also an indictment of our health care system, but that’s another column.

If you have a checking account and a credit card, there is only a 1 in 4 chance you’ve ever used an alternative financial service, according to the FDIC. So let’s take a glimpse into the world of the 2.4 million Texas households that don’t have bank accounts or whose poor credit ratings deny them access to traditional financial services.

In 2011, about a third of Texas families used a check-cashing company, according to the FDIC survey. More than 1 in 5 Texas families borrowed money from a pawnshop, a title loan company or collected an advance on their paychecks or tax rebates, the study found.

Those were the highest rates in the nation.

June 15, 2014
Houston Chronicle